Terminated Single K plan restatement

[Guest robertcusick]

We have several clients who operated single-person or "solo" 401(k)s who distributed all assets from these plans (and closed the account) into IRAs prior to 12/31/08.

The 401(k) custodian is insisting that these clients submit updated Adoption Agreements even though these accounts were effectively closed out. They state that any plan having a balance after 1/1/06, regardless of the plans current status (or status as of 1/1/09 for that matter), terminated or otherwise, must update the document.

It seems illogical that terminated plans require retro restatement. Are updated Adoption Agreements necessary for these plans?

Thank you.

Bob

[Bird]

1) They should have at least been amended to comply with current law at the time they were terminated. I imagine there was an EGTRRA good faith amendment in place, I think the final 401(k) regs should have been done, and maybe a couple of others - but if they are prototypes, you'd think they were done, maybe at the prototype level.

2) I don't believe that restating a plan in 2010 that was terminated in 2008 accomplishes anything whatsoever.

3) What exactly is the custodian going to do if they don't sign?

[Guest robertcusick]

1) They should have at least been amended to comply with current law at the time they were terminated. I imagine there was an EGTRRA good faith amendment in place, I think the final 401(k) regs should have been done, and maybe a couple of others - but if they are prototypes, you'd think they were done, maybe at the prototype level.

2) I don't believe that restating a plan in 2010 that was terminated in 2008 accomplishes anything whatsoever.

3) What exactly is the custodian going to do if they don't sign?

1) These were Oppenheimer Propotype plans

2) I agree, but logic does not prevail at the goverment

3) They have mailed, remailed, called and in most recent written "final" communication stated they "cannot be repsonsible" if these plans are disallowed. I am simply trying to protect my clients' interests and make sure ingoring these efforts is not going to cause a problem down the road.

[Peter Gulia]

Even if one assumes that the investment house is wrong:

If the investment house furnishes the prototype documents without a separate or incremental fee, might the business owner's expense in adopting a revision be relatively modest?

If there are several clients in the same situation with the same documents set, perhaps a practitioner could allocate his or her reading time among the clients so as to bill each only an allocable portion of that time, plus the advising and hand-holding time that's particular to each client.

Shouldn't a practitioner prefer that a client make its choice about whether it wants whatever arguable protection could be gotten from doing the revised documents.

Conversely, in the absence of an IRS determination letter or clear reliance on a prototype, it might be troublesome for a practitioner to assure a client that an absence of a revision couldn't lead to a disqualification.

[Guest robertcusick]

Even if one assumes that the investment house is wrong:

If the investment house furnishes the prototype documents without a separate or incremental fee, might the business owner's expense in adopting a revision be relatively modest?

If there are several clients in the same situation with the same documents set, perhaps a practitioner could allocate his or her reading time among the clients so as to bill each only an allocable portion of that time, plus the advising and hand-holding time that's particular to each client.

Shouldn't a practitioner prefer that a client make its choice about whether it wants whatever arguable protection could be gotten from doing the revised documents.

Conversely, in the absence of an IRS determination letter or clear reliance on a prototype, it might be troublesome for a practitioner to assure a client that an absence of a revision couldn't lead to a disqualification.

Your comments are appreciated. Our reluctance to simply "comply" with their request was two-fold:

1) We did not wish to, by executing documents subsequent to a plan "termination", imply in any way that these plans were/are operational

2) One client, who changed custodian in 2008 (not an IRA rollover and closure) would have had two operating documents. The old custodian acknowledged this would not have been an instnace in which an updated Adoption Agreement was desirable, but their "inability to determine where the assets were transferred" results in these notices being sent to all, regardless of relevance. This causes me to question relevance in cases where accounts no longer exist - as it is illogical to restate a non-existent plan

I have no concern with time or billing, simply with doing the right thing for the client, and this is not a case where I felt we could offer clear enough choices to the client and let them decide (relative to #1 above).

Thanks,

Bob

[K2retire]

Did these clients ever sign any document officially terminating the plans? It they simply withdrew the funds without signing a termination resolution or amendment, they technically still have an active plan. That could be what Oppenheimer is reacting to.

[Bird]

in most recent written "final" communication stated they "cannot be repsonsible" if these plans are disallowed.

Well there you go. They're just being corporate about it and are trying to cover their butt whether it needs it or not.